Tether, a company that is known to be the world’s largest issuer of stablecoins, has agreed to pay a 41 million dollar penalty to resolve a US regulator’s claim that it had falsely represented that its digital tokens were fully backed by dollars.
The Commodity Futures Trading Commission (CFTC) claimed that from at least June 2016 to February 2019, misleading statements have been made by Tether about having sufficient dollar reserves to back each of its stablecoins in circulation.
Stablecoins let traders trade cryptocurrencies including bitcoin more easily, and are expected to have a fixed price and be backed one-for-one at all times. Tether has issued more than $69bn worth of stablecoins and its reserves and ability to fully back its stablecoins, have been questioned by the critics repeatedly. Later, the CFTC found that Tether held sufficient reserves in its accounts to fully back tokens in circulation for only 27.6 percent from September 2016 to November 2018. Rostin Behnam, CFTC acting chair, said that “This case highlights the expectation of honesty and transparency in the rapidly growing and developing digital assets marketplace,”
Tether resolved the case without admitting or denying liability and it stated that there was “no finding that Tether tokens were not fully backed at all times — simply that the reserves were not all in cash and all in a bank account titled in Tether’s name, at all times . . . [Tether] has always maintained adequate reserves and has never failed to satisfy a redemption request”.